I'm a Main Street business evangelist and marketing veteran with over 25 years in the trenches, and I write about small business financing as an employee at OnDeck and also at Forbes. I try to make the maze of small business finance accessible by weaving personal experiences and other anecdotes into a regular discussion around one of the biggest challenges facing small business today. The opinions expressed are my own and not those of OnDeck.

Need A Small Business Loan? Borrowing From Suppliers Is As Easy As Riding A Bike

It’s the small business owner willing to be creative that gets financing these days. At the very least, successful small business owners need to be flexible when weighing their options and less dependent upon traditional means of accessing capital.

Fortunately, there are a lot of alternatives to the bank. Of course some are better than others. One way to access funds we haven’t talked about before, but should be considered. I was reminded of it during a conversation with Eddie Buckley, a Main Street entrepreneur running the 5050 Bike and Skate shop since 2001. Buckley specializes in BMX bikes and is known worldwide as a big promoter of BMX events. He does offer other bikes like road bikes and mountain bikes in addition to BMX bikes.

Buckley started his Layton, Utah bike shop with a partner, but he bought him out nine years after they opened their doors. Committed to bootstrapping their business, Buckley started out with some pretty substantial savings he’d put away, but “Inexperience and poor inventory management,” he says, helped him go through his savings by the end of his first year.

As a result, it put a serious cramp in his cash flow. Although he worked outside of the business to try to infuse capital into the bike shop, it wasn’t enough. He soon found himself in hot water with his vendors because he couldn’t turn the inventory quickly enough to meet his obligations with them.

He had been in business for three years, had a good working relationship with his suppliers, they liked him, and when he approached them honestly about the financial mess he was in, they wanted to help. They had confidence in his ability to turn things around and every vendor he spoke with offered what he called, “Easy-to-pay financing that allowed him to pay them all he owed them over the following 24 months.”

Vendor financing doesn’t always come about this way, but in many industries it’s a win/win situation for suppliers to offer financing to their best distributors. It’s been a few years since his vendors helped him out of this major bind and his business is now on a healthy footing. His attitude about the amount of inventory he needs to have on hand has changed a lot since then, and he says, “You can win customers with kindness and customer service so you don’t always need to hold a huge inventory.”

This experience has taught him a thing or two about successfully working with vendors, acquiring financing, and managing inventory. Here are a few of the things he’s learned and shared with me:

Be honest with your suppliers: This was obviously second nature to Buckley (I don’t think he gave a thought to even stretching the truth). Because he had a good relationship with his suppliers and he leveled with them, they wanted to help him. Although vendor financing isn’t always associated with helping a distributor out of a jam, it still pays to be upfront if you’re going to approach a vendor for financing.

His suppliers wanted to see him succeed: In the 30+ years I’ve been working in small business, I’ve never seen a supplier that wanted any of his or her distributors go belly-up. In fact, depending on the industry, it’s not uncommon for a supplier to share some of the expense of new inventory, special products, or new products. They might not publicize it, but are often willing to help their best distributors take their business to the next level. It’s a win for the distributor and a win for the supplier as they forge stronger relationships and reap the reward of more business.

Suppliers appreciate the potential of their distributor network: Your suppliers are in this for the long haul and appreciate the value you and your business bring to the table. Most of the time, they want to see you succeed as much as you do. This was true for Buckely, and is likely true for your supplier relationships.

After he approached the first supplier and received such a positive response, he decided to reach out to all of them—and received similar reactions. Now that he’s paid up and current with all his suppliers he feels, “If you can’t pay for it with cash, you can’t afford it.”

He said, “You have no idea how it feels to look into my bike shop and know that everything there is paid for. It’s eliminated a lot of sleepless nights for me. It’s very comforting to know that I own all my inventory.”

Main Street is a little different than most of the businesses we read about in the press. It’s not about equity investment and a quick turn on capital. It’s about building something that will last and stand the test of time. Many years ago while living in Japan, a friend and I stopped at “The Second Best Bike Shop In The World.” When we asked why his was the second best, the owner replied, “I don’t want to be arrogant. Somewhere in the world there has to be a bike shop better than mine—But I haven’t found it yet.”

I’d guess 5050 would like to give him a run for his money.

If you’ve had experience working with vendor financing, feel free to share you stories here.

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